Summers Drops Out of Running for Fed Chairman

Former Treasury secretary’s deregulatory stances had worried opponents.

Larry Summers, shown here in 2009, spoke with President Barack Obama on Sunday to inform the president of his decision.

Larry Summers, shown here in 2009, spoke with President Barack Obama on Sunday to inform the president of his decision.

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Larry Summers has withdrawn his name from consideration as the next chairman of the Federal Reserve.

The former treasury secretary and director of the National Economic Council spoke with President Barack Obama on Sunday to inform the president of his decision, according to the White House. Summers explained his reasons in a Sunday letter, the Washington Post reports, citing the potential for a tough confirmation battle as a top reason he was dropping out of the running.

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"This is a complex moment in our national life. I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration, or ultimately, the interests of the nation's ongoing economic recovery," he wrote.

The acrimony has been in full force for months, since Summers was first mentioned in late July as a top White House pick for the post.

Some Democratic lawmakers voiced strong opposition to Summers, with 20 Democratic senators signing a July letter advising the president to nominate current Vice Chairwoman Janet Yellen, widely considered a frontrunner for the job. In addition, the New York Times on Saturday reported that three Democrats on the Senate Banking Committee had signaled they would vote no on a Summers nomination.

Summers' role in derivatives deregulation during the Clinton era was among his opponents' top complaints. Summers' 2005 remarks about women's aptitudes in math and science, made during his tenure as president of Harvard University, were also often cited among his flaws.

[READ: Who’s Afraid of Larry Summers?]

For his part, President Barack Obama reportedly defended Summers to congressional Democrats. Summers had already served the president as a top advisor during the early stages of the economic recovery.

In a Sunday statement on Summers' withdrawal, Obama credited him with being a key factor in setting that recovery in motion.

"Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today," the president said.

It wasn't just Democrats on Capitol Hill who opposed Summers. In late July, a CNBC poll showed half of Wall Street respondents wanted Yellen to head the central bank, compared to 2.5 percent who voiced support for Summers. FDIC Chairwoman Sheila Bair wrote a July op-ed for Fortune advocating for Obama to choose the first woman chair in Yellen.

[OPINION: Labor Inches Toward Yellen]

Sunday, the pro-Yellen contingent continued its campaign. Clinton-era Labor Secretary Robert Reich also made his views clear, responding to Sunday's news with a pro-Yellen tweet: "Janet Yellen understands that good jobs at good wages are good for the economy, and an omnipotent Wall Street isn't," he wrote Sunday evening.

Though Yellen may now appear to be the front-runner, she still may face some dark-horse competition. Obama in July reportedly mentioned former Fed Vice Chair Donald Kohn as a potential pick. Top outlets including the New York Times and trade publication American Banker have also named former Fed Vice Chair Roger Ferguson as a potential pick.

Whatever the president's Federal Reserve chairman decision is, he may want to make it quickly, says one finance expert, for the sake of his own political health.

"[T]he Yellen-Summers public discussion has hurt the presidency and the markets. It may now be resolved quickly," says David Kotok, chairman and chief investment officer at Cumberland Advisors, in an email to U.S. News. "I would not be surprised to see Obama quickly announce Yellen rapidly so he can get on with many other things."

 

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